Concerns that lawmakers could personally benefit from political prediction markets have prompted a new push in Washington to restrict their participation. On June 18, Representative Bryan Steil (R-WI), Chairman of the House Administration Committee, introduced a bill aimed at permanently severing lawmakers from event contract platforms
The proposal, called the “Stop Lawmakers from Predicting Act,” seeks to block members of Congress, their spouses, and their dependent children from wagering on public policy parameters, election data, legislative decisions, or broader geopolitical outcomes.
“The American people deserve to know their Member of Congress is not profiting off insider information,” Chairman Steil stated upon the bill’s introduction. “Lawmakers should be writing policy, not wagering on its outcome.”
Inside the penalty structure
If passed, this legislation leaves no room for compliance loopholes, establishing a rigid penalty architecture designed to financially cripple illicit insider trading within the House and Senate.
Under the proposed framework, lawmakers who violate the trading restrictions face a base statutory fine of either $2,000 or 10% of the total transaction value, whichever amount is greater. To ensure violators cannot profit from illegal activity, the bill institutes a strict clawback rule requiring the total forfeiture of all net gains realized from the prohibited trade.
Furthermore, members are explicitly banned from using campaign donations or their official Members’ Representational Allowances to settle these financial penalties, and those who retire or resign with outstanding balances will be referred directly to the Department of Justice for civil enforcement.
Current rules do not specifically prohibit members of Congress from participating in prediction markets, a gap that has drawn criticism over the potential use of nonpublic information. In some cases, reports have pointed to candidates placing bets on their own electoral outcomes.
The military leak that sparked a crisis
The urgency underlying Steil’s bill is directly linked to an unprecedented insider trading scandal that shook the defense sector earlier this year.
Federal authorities arrested active-duty Army communication specialist Gannon Ken Van Dyke, charging him with using classified intelligence regarding Operation Absolute Resolve, the January 2026 U.S. military raid to capture Nicolás Maduro in Venezuela, to trade election and geopolitical contracts on Polymarket.
Van Dyke allegedly utilized material nonpublic operation schedules to execute 13 precise wagers, parlaying a $33,000 position into more than $409,000 in illicit profits. The case marked the Department of Justice’s first formal prosecution of insider trading native to a Web3 prediction marketplace, demonstrating the critical national security risks of unmonitored event derivatives.
Prediction markets face growing scrutiny
Steil’s House bill aligns with a parallel effort in the Senate, which advanced its own restrictive measures targeting prediction market activity by lawmakers and senior staffers last month.
At the same time, platforms operating in the sector have begun tightening their own oversight. Kalshi has recently introduced a series of integrity measures, including risk scoring, employment verification, and expanded whistleblower tools, in an effort to reduce the risk of market manipulation. In cases flagged as higher risk, the platform now requires traders to disclose employment details, allowing it to screen for possible insider exposure before trades are executed.
On the federal side, the Commodity Futures Trading Commission (CFTC) also shifted its stance on June 10, issuing a Notice of Proposed Rulemaking that abandons blunt, blanket prohibitions. Instead, the CFTC outlined a formal three-step analytical inquiry to meticulously review event contracts involving war, terrorism, assassination, and gaming to determine if they genuinely conflict with the public interest.
Even as regulatory oversight increases, prediction markets continue to expand, with both lawmakers and platforms under pressure to strengthen safeguards around insider trading risks and market integrity.
Also Read: SEC and CFTC Launch Historic Joint Review of Crypto Derivatives Rules
